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An MCDA-based Approach for Creditworthiness Assessment

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Author Info

  • Marco Corazza

    ()
    (Department of Applied Mathematics, University of Venice)

  • Stefania Funari

    ()
    (Department of Applied Mathematics, University of Venice)

  • Federico Siviero

    ()
    (Cohen & Company, Subsidiary of London)

Abstract

In this paper we propose a deterministic methodology for creditworthiness evaluation based on the Multi-Criteria Decision Analysis (MCDA) method known as MUlticriteria RAnking MEthod (MURAME). This approach allows to rank the firms according to their credit risk characteristics and to sort them into a prefixed number of homogeneous creditworthiness groups. Moreover, the methodology allows to estimate ex-post proxies of the probabilities of default and of the probabilities of transition. Then, we apply the proposed approach to check its capability to evaluate the creditworthiness in real cases; in particular, we consider the case of an important north eastern Italian bank.

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File URL: http://virgo.unive.it/wpideas/storage/2008wp177.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by Department of Applied Mathematics, Università Ca' Foscari Venezia in its series Working Papers with number 177.

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Length: 19 pages
Date of creation: Nov 2008
Date of revision:
Handle: RePEc:vnm:wpaper:177

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Related research

Keywords: Multi-Criteria Decision Analysis (or MCDA); MUlti-criteria RAnking MEthod (or MURAME); credit risk assessment;

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References

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  1. Zopounidis, Constantin & Doumpos, Michael, 2002. "Multicriteria classification and sorting methods: A literature review," European Journal of Operational Research, Elsevier, vol. 138(2), pages 229-246, April.
  2. Zopounidis, C., 1999. "Multicriteria decision aid in financial management," European Journal of Operational Research, Elsevier, vol. 119(2), pages 404-415, December.
  3. Michael Doumpos & Fotios Pasiouras, 2005. "Developing and Testing Models for Replicating Credit Ratings: A Multicriteria Approach," Computational Economics, Society for Computational Economics, vol. 25(4), pages 327-341, June.
  4. Rogers, Martin & Bruen, Michael, 1998. "Choosing realistic values of indifference, preference and veto thresholds for use with environmental criteria within ELECTRE," European Journal of Operational Research, Elsevier, vol. 107(3), pages 542-551, June.
  5. Doumpos, M. & Kosmidou, K. & Baourakis, G. & Zopounidis, C., 2002. "Credit risk assessment using a multicriteria hierarchical discrimination approach: A comparative analysis," European Journal of Operational Research, Elsevier, vol. 138(2), pages 392-412, April.
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Cited by:
  1. Marco Corazza & Stefania Funari & Riccardo Gusso, 2012. "An evolutionary approach to preference disaggregation in a MURAME-based credit scoring problem," Working Papers 5, Department of Management, Università Ca' Foscari Venezia.

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